In the midst of all the changes occurring — or at least being talked about — in the legal profession today, many people forget that two of the basic principles that successful firms have always followed have not changed:

• They focus their resources on developing certain practice areas. Some of these areas are “standards” — they are always in demand. Others are cyclical, depending on the economy, new legislation by Congress or new regulations by federal and state governments.

• They identify certain trends, some of which will be short-lived and others that will be permanent, and capitalize on these trends.

Twice a year for over 20 years we have published a report on what is going on in the profession, not only in the United States but also in other parts of the world. There are often significant changes from one report to the next. This is a special update on the year-end report we published last December.

PRACTICE AREAS

The following areas are red hot, not just locally but nationally:

• Regulatory: Although Dodd-Frank and ObamaCare will continue to face challenges, both political and legal, regulation is a major issue. It particularly impacts certain industries — health care, financial services, pharmaceutical and energy. Closely related to this area is …

• Government Affairs: A growing number of firms are creating government affairs groups because of the increasing role of government, both federal and state, in business and legal matters.

• Health Care: Covers many specific practice areas and all types of providers.

Some of the areas that continue to be hot, together with a few new ones, include:

• Financial Services: In addition to Dodd-Frank, the new drivers in this area are consumer finance and suits being filed against lenders for what has come to be known as “robo-signing” of documents. Another developing issue is increased regulatory requirements for private equity and hedge funds.

• Energy: Particularly oil, gas and nuclear. Gas has become red hot in Pennsylvania and New York because of the proposed regulations from the Delaware River Basin Commission that will impact the Marcellus Shale gas play.

• Labor & Employment: One of the “standard” areas referred to above that is always in demand, L&E is becoming even hotter because of wage-and-hour actions, government investigations in the health care industry and, of course, in Wisconsin, Ohio and perhaps soon in Pennsylvania, movement to strip collective bargaining rights from public sector employees.

• Immigration: Arizona is just the tip of the iceberg.

• White-Collar Crime: Heating up due to financial fraud investigations and continued violations of the Foreign Corrupt Practices Act.

• Litigation: Despite the trends moving toward alternative fee arrangements (AFAs) and for corporations to reduce spending on outside legal counsel, the number of cases being filed continues to rise dramatically. Construction litigation and complex, “bet the company” cases are red hot. Patent litigation continues to be hot and school-based litigation is getting hot. However, also hot in some firms is …

• Alternate Dispute Resolution (ADR): Both mediation and arbitration, because of the high costs of litigation and delays in the courts.

MARKETING AND BUSINESS DEVELOPMENT

While it hasn’t reached tidal wave proportions yet, online video advertising is attracting increasing interest among law firms, SmallLaw as well as BigLaw. According to eMarketer Research, online video is three times more likely to increase the conversion of a viewer into a potential client and is projected to grow 34 percent every year through 2014.

Social media, particularly Facebook, LinkedIn and Twitter, continue to be hot areas for marketing. LinkedIn is generally considered best for lawyers for business purposes, Facebook for personal purposes — and now perhaps for advertising. However, in many firms the results from social media are mixed. Several experts state emphatically that “It is over-hyped.” Also see “Other Trends & Issues” below.

While it is not a trend — at least not yet — the ABA Commission on Ethics 20/20 is obviously considering more regulation of social media, blogs and lawyer websites as indicated by the rules proposed in its Sept. 20, 2010 issues paper.

More firms are initiating client interviews, either conducting them themselves or retaining experienced outside consultants to conduct them. Using outsiders is a more cost-effective approach because it saves considerable non-billable lawyer time. It also produces more honest feedback for use in strategic planning and in the development of action plans for each client.

OTHER TRENDS AND ISSUES

• Outsourcing: Although there have been published reports to the contrary, outsourcing of basic legal work to firms in India continues to be hot. Furthermore, it is not just to India. Originally founded in New York, Axiom Global Inc., which provides lawyers-for-hire to major corporations, has just purchased another legal staffing company based in Chicago.

• More outsourcing: U.K. firm CMS Cameron McKenna has gone a step further and is outsourcing all support functions except business development and communications. This will reduce their support staff by possibly 90 percent. However, many of the now-former staff will be employed by Integreon, the outsourcing firm, and still work in some of Cameron’s offices.

• Alternate Fee Arrangements (AFA): They are increasing, mostly in the form of fixed or capped fees. But many GCs are still not raising the issue and most law firms, even if willing to discuss AFAs, are not raising it either. What is lostin all the discussions about value — and how to define it — are two other issues that are important to most clients: transparency, which hourly billing provides, and predictability, which fixed or capped fees provide.

• Mergers: U.S. mergers were down sharply the first three quarters of last year but announcements of planned mergers increased substantially in the fourth quarter and were almost back to the pre-recession level. We expect this to continue. We also expect an increase in the number of mergers involving local firms.

• Retreats: Most firms that cancelled them for the last two years because of the recession have scheduled them for this year. In a related trend, more firms are retaining outside consultants to plan and facilitate their retreats.

• Strategic Planning: As the recession gained momentum (or the economy lost it), many firms abandoned strategic planning for “survival planning.” Now that the economy is recovering, many of these firms are either updating their strategic plans or developing new ones.

• Lateral Entries: BigLaw firms and even some larger MidLaw ones have now sharply reduced their lateral hiring unless they have a need in a particular practice area or industry. However, because of increased hourly rates and the resulting loss of clients, as well as increased billable hour requirements, experienced partners continue to leave large firms to join mid-sized and even small firms.

• Summer Associate Hiring: Law schools throughout the country have reported an increase in the number of summer associates hired this year. Although they are still below pre-recession levels, this could indicate that firms are more optimistic about future business than many of them have stated.

• Law School Applications: The number of lawyers in the 250 largest law firms has declined each of the last two years, with 70 percent of the decline in the associate ranks. Yet law school applications increased 7 percent last year. Is a law degree replacing the MBA as the “degree of choice” as it was many years ago?

• E-Discovery Costs: The annual litigation survey published by Fulbright & Jaworski reports that nearly 40 percent of the respondents expressed the need to increase spending on electronic discovery. This concerns them, given the already high cost. As one possible solution, a few firms are partnering with e-discovery vendors because they believe it is cost-effective for both the client and the firm.

• Firm Management: Various surveys and conferences report that over 70 percent of the responding managing partners do not have a job description, and most partners do not know what their managing partner does. However, this is not a trend. These were essentially the same results reported 15 years ago.

• Social Media: Issues are arising. Clients are increasingly asking for counsel on employees’ use, and the management, of social media. Firms are now recognizing the need to develop electronic and social media policies for themselves.

There are ethics considerations. There are challenges for lawyers in maintaining the confidentiality of client information. And there are many issues with respect to the use of social media in litigation. One report may have summed it all up: “The law has significantly lagged behind social networking.” •

ROBERT W. DENNEY is president of Robert Denney Associates Inc. in Wayne, Pa. The firm provides strategic management and marketing counsel to law firms throughout the United States and parts of Canada. Twice a year Denney writes a report on “What’s Hot and What’s Not in the Legal Profession.” He can be reached at 610-664-7020 or bob@robertdenney.com.